Liquidity War 3.0: Bribery has become the market

Author: arndxt; Compiled by: Block unicorn

I believe we will witness the yield wars again. If you have been in the decentralized finance (DeFi) space long enough, you would know that Total Value Locked (TVL) is just a vanity metric, until it isn't.

In a highly competitive, modular world of automated market makers (AMM), perpetual contracts, and lending protocols, what truly matters is who can control liquidity routing. It is not about who owns the protocol, nor even who distributes the most rewards.

But who can persuade liquidity providers (LPs) to deposit and ensure that the TVL is sticky.

This is precisely the starting point of a bribery economy.

The previously informal ticket buying behaviors (such as Curve Wars, Convex, etc.) have now professionalized, becoming a mature liquidity coordination market equipped with order books, dashboards, incentive routing layers, and in some cases, even gamified participation mechanisms.

This is becoming one of the most strategically important layers in the entire DeFi stack.

Changes: From Issuance to Incentives in Digital Yuan

In 2021-2022, the protocol guided liquidity through traditional means:

1. Deploy the liquidity pool
2. Issue Tokens
3. Relying on profit-driven LPs to stay even after the decline in yield.

But this model is fundamentally flawed; it is passive. Each new protocol competes with an invisible cost: the opportunity cost of existing capital flows.

I. The Origin of Yield Wars: The Rise of Curve and Voting Markets

The concept of yield war began to take shape during the Curve war in 2021.

The unique design of Curve Finance

Curve has introduced a voting escrow (ve) token economics, allowing users to lock $CRV (Curve's native token) for a maximum of 4 years in exchange for veCRV, thereby gaining:

• Enhanced rewards for Curve liquidity pools
• Governance power to vote on weight (which liquidity pools can issue)

This creates a meta-game around the issuance:

• The agreement hopes to obtain liquidity on Curve.
• The only way to gain liquidity is to attract votes to their pool.
• Therefore, they began to bribe veCRV holders to vote in their favor.

Then there is Convex Finance

• Convex abstracts the locking of veCRV and acquires aggregated voting power from users.
• It has become the "Kingmaker of Curve," wielding significant influence over the distribution of $CRV.
• The project begins to bribe holders of Convex/veCRV through platforms like Votium.

Lesson 1: Whoever controls the weight controls the liquidity.

II. Yuan Incentives and Bribery Market

The first bribe economy

Initially, it was only manually influencing the issuance volume, but it later developed into one of the mature markets. Their liquidity pools are usually embedded in partnerships, with a total locked value of (TVL) exceeding 580 million dollars, adopting dual token issuance, weighted bribery, and surprisingly sticky liquidity providers (LP) as the foundation.

Their model emphasizes fair value redistribution, meaning that issuance is guided by voting and real-time capital velocity indicators.

This is a smarter flywheel: LPs are rewarded based on the effectiveness of their capital rather than just its size. This time, efficiency is finally incentivized.

Royco

Within a month, its TVL surged to 2.6 billion USD, a month-on-month growth of 267,000%.

While some of them are "point-driven" capital, it is important to focus on the infrastructure behind them:

• Royco is a liquidity-preferred order book.
• Protocols cannot simply provide rewards and hope. They issue requests, and then LP decides to invest funds, ultimately coordinating to become a market.

This narrative is not only about the meaning of profit games:

• These markets are becoming the meta-governance layer of DeFi.
• HiddenHandFi has cumulatively sent over 35 million dollars in bribes in major protocols such as VelodromeFi and Balancer.
• Royco and Turtle Club are now shaping the validity of the issuance.

The mechanism of liquidity coordination market

1. Bribery as a Market Signal

• Projects like Turtle Club allow LPs to see where the incentives are directed, make decisions based on real-time metrics, and receive rewards based on capital efficiency rather than just capital size.

2. Request for Liquidity (RfL) as Order Book

• Projects like Royco allow protocols to list liquidity needs like orders in the market, and LPs fill them based on expected returns.
• This has become a two-way coordination game, rather than a one-way bribery.

Ultimately, if you decide the direction of liquidity, you influence who can survive in the next market cycle.